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Punjab and the national economy
By
Shahid Javed Burki
IF politics proceeds on its promised course, there is likely to be a
considerable rearrangement in the distribution of power among
different political groups. This will have profound implications for
the economic development of Punjab, Pakistan’s largest province in
terms of both population and the contribution it makes to the
national economy.
Given that, it is important that all players in the political game
must recognise that maintaining the economic momentum picked up in
recent years by Punjab is of vital national interest.
Today Punjab is a significant contributor to the national economy.
By my estimate, it contributes a slightly higher share to the
national output (60.1 per cent) compared to its share in total
population (57.4 per cent).
The government of Punjab estimates that in the financial year 2007,
the province accounted for 61.3 per cent of wholesale and retail
trade, 57 per cent of agriculture and 58.2 per cent of industrial
value added in national output. Overall, Punjab contributes more
than 50 per cent to the country’s GDP in almost every sector in the
national accounts. And yet much of the economic power is wielded by
the federal government.
As the current chief minister of the province put it in his ‘vision
2020’ statement issued in 2005, the federal government is “totally
in-charge of fiscal and monetary policies; it frames the tax
policies, trade policies and also plays an important part in
regulatory environment of firms and companies”. Under the current
order of things, the provincial governments operate within highly
circumscribed space. In fact, this space is even more limited than
that envisaged in the Constitution of 1973. That document provided
much greater autonomy to the provinces than is currently allowed by
those who wield power today.
There was a political reason for Punjab’s remarkable economic
performance over the last several years when its total output
expanded at a rate significantly higher than the increase in the
national product. It happened because political power in Islamabad
and Lahore resided in the same set of hands. That has not always
been the case and may not be the case in the future.
The sharp exchanges between Benazir Bhutto and the current chief
ministers of Punjab and Sindh following the unfortunate incident of
Oct 18 do not augur well for relations between the centre and the
federating units if politics proceeds on the course on which it is
travelling at this time.
The tension between the centre and Lahore that developed when
governments belonging to different parties assumed power in these
two places in 1988 caused considerable economic harm not only to the
economy of the province. That particular episode in the country’s
history also did a lot of damage to the national economy.
Economists now believe that it is important to bring the government
as close as possible to the people it serves. In large federating
systems, this means the grant of considerable functional autonomy to
the federating units. It also means the creation of a system of
local government that passes power on to people’s representatives.
It is interesting to note that the way General Musharraf has
governed the country in the last eight years is to accumulate
considerable economic and political power in his hands while, at the
same time, establishing a system of local government to which
considerable power has been devolved. The provinces suffered in this
system of governance.
The reason Punjab was able to function with a fair amount of
autonomy was not because the system allowed it but because of the
very close links between the province’s chief executive and the
leader of the party that provided President Musharraf the main base
of political support. That situation may not survive.
It is important to recognise that geography has placed Pakistan in a
unique situation. It has on its four sides, centres of growing
economic activity and potential. China, to Pakistan’s north, is the
largest country in the world in terms of population. It is also the
world’s fastest growing economy.
To the east is India, the second billion plus country in the world
and also one of the world’s most rapidly growing economies. To the
west, are the oil-producing and exporting countries accumulating
large amounts of capital surplus to their needs. And to the
northwest are the countries of Central Asia with enormous resources
and, once they are able to resolve their political problems,
enormous economic potential.
It is inevitable that when economies grow rapidly they trade with
one another. The four areas of immense economic activity in
Pakistan’s immediate neighbourhood will also develop trade and
exchanges among themselves. A significant proportion of this will be
the movement of goods and commodities and a good part of this could
flow through Pakistan.
There is money to be made in becoming the centre of transit trade
but that will require investments in a number of service activities
— warehousing, trade financing, servicing of vehicles, provisions
for those plying the trade etc. These involvements are better done
by the private sector but within the regulatory environment created
by the provincial governments. Pakistan will benefit only if
politicians operating from different centres of power are able to
work together.
The only viable way of approaching the dangers inherent in the way
the political system operated in the past is to have the politicians
contending for power reach a consensus on the distribution of
responsibilities among the three tiers of government — the
governments at the federal, provincial and local levels. The
arrangements that need to be worked out should be even more generous
than those incorporated in the original 1973 Constitution.
One important change that needs to be made is to allow greater
authority to the sub-national governments in two areas — trade and
finance. While the governments below the federal level have some
room available to them in the area of finance, they have none in the
area of trade. And yet it is trade that will play an important role
in determining the economic future of the country’s four provinces.
Unlike most other large federal systems, all Pakistani provinces and
territories have international borders; Punjab and Sindh with India,
the NWFP with Afghanistan, Balochistan with Afghanistan and Iran,
and the Northern Areas with Afghanistan and China.
There is considerable informal trade between these federating units
and the countries they border. This trade is informal since national
trade policy has put foreign relations above provincial economic
considerations. One way of regularising this trade would be to allow
a greater role in this area to the governments below the federal
level.
Before a new political order emerges, it would be useful if a
consensus could be reached among those who are likely to wield power
in different places to work for the national good, not just for
their narrow interests.
Dawn: Tuesday November 06, 2007 |
